An inquiry into a planned dam expansion in NSW has heard claims the project is designed to benefit miners.

An Upper House committee is holding an inquiry into the rationale and justification for building and expanding dams in rural NSW.

It has looked at plans to increase the capacity of Wyangala Dam near Cowra and to build a new dam at Dungowan, near Tamworth.

Over $1 billion has been committed to a range of projects, which also include upgrades to Gin Gin Weir, west of Dubbo in the Macquarie Valley, and the building of a new dam at Mole River in the Border Rivers region.

One of the first to appear before the committee was Maryanne Slattery; a former director with the Murray-Darling Basin Authority (MDBA).

She was asked about NSW Water Minister Melinda Pavey’s reasons for expanding Wyangala Dam.

It had been promoted as a way to provide security for town water supplies.

“I think it's quite disengenous to be talking about town water security when in the Lachlan Valley, for example, a really major consumer of water is gold mining,” Ms Slattery told the inquiry.

“You really have to look at the gold mines in that valley and their water needs and their plans for expansion.

“It seems to be code to be talking about town water supply and industry, when really it seems to be about water for mining.”

The NSW Department of Planning, Industry and Environment claims any extra captured water will be held for times of low rainfall, with no change to sustainable diversion limits.

Ms Slattery questioned that idea.

“You can't increase the dam and capture that extra water and be consistent with the Water Act of the [Murray-Darling] Basin Plan,” she said.

“It's really tearing up the Basin Plan if you go ahead with these expansions.”

None of the figures appearing before the committee could put a final price on the planned projects.

The uncertainty over that price tag remains a major concern for nearby communities.

Ms Slattery said the planning process should not proceed without the final costings.

“That's $650 million of taxpayers' money that we've announced that we are going to spend on this project and yet there's no business case?” she said.